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Is Long Term Care Insurance A Scam?
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Many people want to know is long term care insurance a scam or not. It certainly is a controversial form of insurance, as some people feel it is of limited benefit. Other people believe it is imperative to own a long term care insurance policy. But who is right?

Let’s consider why people buy long term care insurance. The problem they are trying to solve is that Medicare and other health insurance policies do not cover long term care expenses. These include nursing homes, custodial care, adult day care, homemaker services, hospice, and assisted living.

All of these services can be very expensive. People who buy long term care insurance are afraid of spending the end of their lives in a low quality nursing home, running out of money, or being a burden on their families. These are all legitimate concerns.

However, is long term care insurance the answer? Well, consider what it offers. Most policies provide a fixed benefit per day for a set amount of time. For example, someone could buy a policy that would last for 4 years and pay $100 a day. The 4 year time frame would only start once the person started using the benefits.

This is where it gets complicated. As with any insurance product, the key is to buy enough insurance, not more than is needed. Since long term care insurance provides coverage for events that hopefully are years, if not decades, in the future, it is difficult to predict how much insurance is necessary.

The two major questions to answer are how much coverage will I need, and for how long. Determining how long is a little simpler to answer. Most people go with something like 3 or 5 years, assuming that if they end up in a nursing home, their stay will be what the average is. For someone like me, it’s a little harder. My grandmother spent the last 10 years of her life in a nursing home. Anyone with a similar family history would need to consider if they might need nursing home care for a longer time than the average.

The second question, regarding how much coverage, is more complex. Most people estimate based on nursing home rates adjusted for inflation. They then take these daily rates and subtract what they think they will be able to pay themselves.

So where’s the problem here, someone might ask. Long term care insurance seems like a good financial planning strategy.

But is long term care insurance really the best choice for covering these kinds of expenses? Or is it a scam? The answer to the first question is maybe, and to the second, sometimes.

Because long term care insurance is so complicated, people often buy a policy without fully understanding what they are buying. They haven’t considered other options for paying for long term care. For example, if someone has a pension that pays $100 a day, that’s $100 a day less in coverage they would need.

Also, some policies provide coverage for life, rather than for a set number of years. These policies are very expensive. Most people won’t need this kind of coverage. The accusations against long term care are usually made in cases where people bought entirely too much coverage, trapping themselves into paying very expensive premiums.

There are some people who should not buy long term care insurance. One group is those with few assets. They will most likely not be able to afford the premiums, and would most likely quality for Medicaid, which does cover long term care.

Another group is those with significant assets. If you have enough money that you could pay for all long term care expenses without selling the house, then you have no need for long term care.

It’s the group in the middle, those who could afford the premiums and have enough to pay for part of their long term care expenses who would be wise to consider long term care insurance.

In short, long term care insurance is a product that can be a good option for some people. Is long term care insurance a scam? Only if it is pushed on the wrong customers. Think through your own situation, and once you anwer for yourself is long term care insurance for you, shop around.


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